Toro 2011 Annual Report Download - page 24

products in Canada to support their businesses and increase our subject to the consent of the lenders under our credit arrange-
net sales, as well as to free up our working capital for our other ments, which consent may be withheld or granted subject to condi-
strategic purposes. As a result, we are dependent upon the joint tions specified at the time that may affect the attractiveness or
venture for our inventory financing programs, including floor plan viability of the transaction.
and open account receivable financing. Additionally, we are depen- The overall availability of credit continues to be limited. Although
dent upon TCFCFC to provide inventory financing to dealers of our in fiscal 2011 we negotiated a new $150 million revolving credit
products in Canada. facility that does not expire until July 2015, market deterioration or
The availability of financing from our joint venture or otherwise other factors could jeopardize the counterparty obligations of one
will be affected by many factors, including, among others, the over- or more of the banks participating in our facility, which could have
all credit markets, the credit worthiness of our dealers and distribu- an adverse effect on our business if we are not able to replace
tors, and regulations that may affect TCFIF, as the majority owner such credit facility or find other sources of liquidity on acceptable
of the joint venture and a subsidiary of TCF National Bank, a terms.
national banking association. Any material change in the availabil-
If we are unable to comply with the terms of our credit
ity or terms of credit offered to our customers by the joint venture,
arrangements and indentures, especially the financial
any termination or disruption of our joint venture relationship or any
covenants, our credit arrangements could be terminated
delay in securing replacement credit sources could adversely affect
and our senior notes and debentures could become due
our sales and operating results.
and payable.
The terms of our credit arrangements and the indentures We cannot assure you that we will be able to comply with all of the
governing our senior notes and debentures could limit terms of our credit arrangements and indentures, especially the
our ability to conduct our business, take advantage of financial covenants. Our ability to comply with such terms depends
business opportunities and respond to changing on the success of our business and our operating results. Various
business, market, and economic conditions. risks, uncertainties, and events beyond our control could affect our
Additionally, we are subject to counterparty risk in our ability to comply with the terms of our credit arrangements and/or
credit arrangements. indentures. If we were out of compliance with any covenant
Our credit arrangements and the indentures governing our 6.625% required by our credit arrangements following any applicable cure
senior notes and 7.800% debentures include a number of financial periods, the banks could terminate their commitments unless we
and operating restrictions. For example, our credit arrangements could negotiate a covenant waiver. The banks could condition such
contain financial covenants that, among other things, require us to waiver on amendments to the terms of our credit arrangements
maintain a minimum interest coverage ratio and a maximum debt that may be unfavorable to us. In addition, our 6.625% senior
to earnings ratios. Our credit arrangements and/or indentures also notes and 7.800% debentures could become due and payable if
contain provisions that restrict our ability, subject to specified we were unable to obtain a covenant waiver or refinance our
exceptions, to, among other things: medium-term debt under our credit arrangements. If our credit rat-
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limit loans and investments, including acquisitions and transac- ing falls below investment grade and/or our average debt to earn-
tions with affiliates; ings before interest, tax, depreciation, and amortization (‘‘EBITDA’’)
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create liens or other encumbrances on our assets; ratio rises above 2.00, the interest rate we currently pay on out-
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disposition of assets; standing debt under our credit arrangements would increase, which
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engage in mergers or consolidations; and could adversely affect our operating results.
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pay dividends that are significantly higher than those currently
Legislative enactments could impact the competitive
being paid, make other distributions to our shareholders or
landscape within our markets and affect demand for our
redeem shares of our common stock.
products.
These provisions may limit our ability to conduct our business,
take advantage of business opportunities, and respond to changing Various legislative proposals, if enacted, could put us in a competi-
business, market, and economic conditions. In addition, they may tively advantaged or disadvantaged position and affect customer
place us at a competitive disadvantage relative to other companies demand for our products relative to the product offerings of our
that may be subject to fewer, if any, restrictions or may otherwise competitors. For example, any fiscal-stimulus or other legislative
adversely affect our business. Transactions that we may view as enactment that inordinately impacts the lawn and garden, outdoor
important opportunities, such as significant acquisitions, may be power equipment, or irrigation industries generally by promoting
the purchase, such as through customer rebate or other incentive
programs, of certain types of mowing or irrigation equipment or
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